Halting the Corvair made America safer
This is a response to an excerpt from Paul Ingrassia’s Engines of Change: A History of the American Dream in Fifteen Cars, published this month by Simon & Schuster.
The causal stretch by Paul Ingrassia over three decades and millions of intervening human events leads him to conclude that “decades after its demise, in the election of 2000, the Corvair’s legacy improbably helped to put George W. Bush in the White House.”
Egads! – as the British say. His otherworldly trek through American history reminds me of Edward Lorenz’s “butterfly effect,” in which the trail of a tornado is traced all the way back to the flapping of a butterfly’s wings thousands of miles distant. It is one thing to lament the deadly, dancing design of the Corvair until the 1965 model, when the stabilizing, dual-link suspension system was finally installed; it is quite another to burden this automotive offspring of GM’s Ed Cole with the lawless, corporatist, war-starting, anti-democratic Bush regime selected by five Supreme Court justices-turned-Republican politicians in their 5-4 dictate of Bush v. Gore.
The Corvair was an attractive but lethal car. The government-sponsored taskforce, under President Richard Nixon, shaped by a former GM man, could not whitewash the Corvair’s role in the avoidable deaths and injuries of so many unsuspecting motorists. The novel Corvair, with its air-cooled rear engine was widely disliked by auto dealers, but for the wrong reasons. As the famous John DeLorean (former GM vice-president and author of On a Clear Day You Can See General Motors) related, inside the company it was common knowledge that on certain turns the Corvair became unstable. This loss of control even led to the deaths of some children of GM executives. GM also designed the leading edge of the steering mechanism just two inches from the surface of the front tire, thereby exposing the driver to the rearward displacement of the steering column, especially in a left-front collision. Moreover, as GM admitted in a belated public recall, Corvairs emitted a risky amount of odorless carbon monoxide from their heater exchange system during cold weather.
The tragic saga of the Corvair and its victims did, as Ingrassia points out, produce consequences, but only as part of broader revelations regarding the industry suppression of long-known safety devices now taken for granted by car owners.
Today people expect air bags, seat belts, padded dash panels, head-restraints, better brakes, steady vehicle handling and overall crash protection. Auto companies now boast about their vehicles’ safety in their advertisements. Consumers expect their cars to be recalled and fixed when there is a defect attributed to the manufacturer.
Federal auto and highway safety regulation, still too intermittent in my view, has worked to save over a million American lives while helping to diminish or prevent many more injuries. Hundreds of billions of dollars in medical and disability expenditures have been saved as well. To his credit, after warning that the first federal motor vehicle regulations could shut down the industry in 1966, Henry Ford II recognized a few years later that federal standards made cars safer, more fuel-efficient and cleaner.
How the Corvair’s rise and fall changed America forever
This is an excerpt from Engines of Change: A History of the American Dream in Fifteen Cars, published this month by Simon & Schuster.
However it unfolds, this year’s U.S. presidential election is unlikely to be as close as the one America experienced in 2000. That election was decided, after months of contention and suspense, by disputed ballots and a razor-thin result in Florida.
The historic events, however, were set in motion 40 years earlier by a badly flawed automobile, the Chevrolet Corvair. In the mid-1960s the Corvair made Ralph Nader famous. It also made lawyers ubiquitous, thereby making lawsuits one of the great growth industries of the late 20th Century. And decades after its demise, in the election of 2000, the Corvair’s legacy improbably helped to put George W. Bush in the White House. The car’s story is one of genius, hubris, irony and tragedy, not to mention unforeseen long-term effects on American life and thought.
The Corvair debuted as a 1960 model as one of the first American “compact cars.” (The term was coined by American Motors Chairman George Romney, later Michigan’s governor and father of current presidential candidate Mitt Romney.) The car was “the most profoundly revolutionary car … ever offered by a major manufacturer,” wrote Sports Car Illustrated when the Corvair was launched. It was the brainchild of a brilliant and uber-confident General Motors engineer, Edward N. Cole.
(View a slideshow of the fifteen cars that changed America here or click on the photo above)
Cole grew up in a small Michigan town, where he learned to tune old automobiles fast enough to outrun any other cars in the county. He attended the General Motors Institute in Flint, Mich., alternating study with internships at GM. After graduation he helped GM’s Cadillac division win a big Army tank contract by boosting the performance and reliability of the tank’s engine.
I have too much to do already, but dang it, somebody’s wrong on the internet.
If Corvairs were as bad handling as Nader said, why would a bunch of car fanatics still be racing them 50 years later?
http://www.youtube.com/watch?v=GJVjJVdj4 T4&feature
GM didn’t bow to any pressure — in fact, they reacted to Nader’s book by extending the car’s production several years longer than previously planned.
Poor sales due to competition with a 289 cu in Mustang with a 4 on the floor (drool) is what really killed the car. If it had lasted another few years, until the gas shortage of the early 70′s, it might still be with us today, just like the cars that inspired it, the Volkswagen and Porsche.
How to stop the Whac-a-Mole of insider trading
Preet Bharara’s work rooting out insider trading is good news for U.S. investors, as long as you’re not one of the 240 people being investigated. But until governments tackle insider trading on a global basis, it’s like playing Whac-A-Mole. If your business model includes insider trading, you can pop up in Hong Kong or London almost as easily as Tokyo and Shanghai without much fear of prosecution.
That number — 240 people — is shocking. Prosecutors already have 57 convictions or guilty pleas since Raj Rajaratnam was arrested in October 2009, dozens more than during the Wall Street scandals of the 1980s. Bharara told the New York City Bar Association that insider trading on Wall Street was rampant. Rengan Rajaratnam, Raj’s brother, encapsulated the culture cynically but perfectly. Optimistic about his efforts to recruit a McKinsey consultant to their gang, he said to Raj, “Scumbag. Everybody is a scumbag.”
Alan Greenspan once famously said that the “market” would sort out financial fraudsters — regulators weren’t needed. Now we know the market actually includes quite a number of fraudsters who don’t seem to mind doing business with one another at all.
How did it get this bad?
We have been studying insider trading in Hong Kong for the past year. In reviewing enforcement of insider trading laws in major markets over the past 30 years, two factors stand out: the leniency shown crooks during the U.S. scandals of the 1980s and the effective tolerance of insider trading by governments everywhere else.
Twenty-five years ago last month, Rudy Giuliani and his team introduced the perp walk to Wall Street, handcuffing a Kidder Peabody arb in front of his colleagues and marching him out of the building. As one of the arb’s colleagues said, “if it was attention they wanted, they got it.” It was a good show, part of what’s needed for deterrence, but when it all ended six years later, most of the bad guys got off easy. Michael Milken was indicted on 98 felony counts and faced 755 years in jail. He pleaded guilty to six, was sentenced to 10 years, and was out in two. (Update: Milken was indicted on insider trading charges, but was not convicted and did not plead guilty to them.) His 1987 salary of $550 million didn’t quite cover his $600 million fine and restitution payments (Editor’s note: the original version of this column indicated that the fine Milken paid was $600 million; in fact, it was a $200 million fine and $400 million returned to investors). Ivan Boesky pleaded guilty to a single felony, paid a $100 million fine, and spent 21 months in a minimum security prison camp in California. Martin Siegel was out in two months. The most popular sentence handed down seemed to be a year and a day and federal guidelines at the time allowed parole after serving one-third of a sentence.
One can only wonder how many of this generation’s cheaters would have avoided the pain they’ve caused their loved ones if a tougher insider trading message had been sent 20 years ago.
@cranston; “…secretive and conducted by individuals..”
This is exactly at the bottom of corruption and of our economic downfall.
Then we must shut down all the Wall Streets. Most of us will not miss them as they have robbed us all of our money and now have gotten us into a huge debt.
I’m sure there are other more productive & honest ways of running a financial system.
Why the bank dividends are a bad idea
On the basis of “stress tests” it ran, the Federal Reserve has given permission to most of the largest U.S. banks to “return capital” to their shareholders. JPMorgan Chase announced that it would buy back as much as $15 billion of its stock and raise its quarterly dividend to 30 cents a share, up from 25 cents a share.
Allowing the payouts to equity is misguided. It exposes the economy to unnecessary risks without valid justification.
Money paid to shareholders (or managers) is no longer available to pay creditors. Share buybacks and dividend payments reduce the banks’ ability to absorb losses without becoming distressed. When a large “systemic” bank is distressed, the ripple effects are felt throughout the economy. We may all feel the consequences.
Most European banks passed stress tests in July 2011, only to find themselves near failure, including one major bank, Dexia, which was nationalized shortly thereafter. Even if U.S. stress tests are better, are American banks healthy and immune? Is it prudent to allow them to make payouts to shareholders? Before 2008, banks convinced regulators that they were safe on the basis of insurance they bought from AIG. Banks avoided billions in losses when AIG was bailed out. Assets considered “safe” by regulators routinely turn out to inflict losses. We often discover hidden risks when it is too late.
Among the most obvious mistakes made in 2007-2008 was allowing banks to deplete their ability to withstand losses. The largest 19 U.S. banks paid almost $80 billion to shareholders between the third quarter of 2007, when trouble in the housing market was looming, and through the worst of the financial crisis in 2008. About half of the money the government invested in banks during the crisis, when credit markets froze, was paid out to shareholders and not used for lending or to pay creditors.
Dividends and share buybacks for large banks resumed in spring 2011. The largest U.S. banks paid $33 billion in the first nine months of 2011. When JPMorgan Chase paid almost $1 billion in dividends in November 2011, out of more than $11 billion it paid out in the last year, its debt were at $2.1 trillion, while its entire equity was worth less than $110 billion, about 5 percent of the debt. The creditors of any normal company would have not allowed shareholders to take out cash under such conditions. For banks, taxpayers must worry, because taxpayers bear the consequences of serious losses.
If a strong bank retains its earnings and invests prudently, shareholders are still entitled to the profits from these investments, as long as debts are paid. Many successful companies do not pay dividends for extended periods of time, and their stock prices reflect their good investments. When banks distribute profits to shareholders and continue to borrow, they create more risk. This pollutes the interconnected financial system by increasing its fragility. If banks do not want to invest the profits, they can use them to pay down some of their debts.
The statement ” About half of the money the government invested in banks during the crisis, when credit markets froze, was paid out to shareholders and not used for lending or to pay creditors” is not correct. The banks paid back the government in full with dividends and a nice profit including the payment on options. A false statement like this makes the rest of the article worthless.
The Trojan Horse of cost benefit analysis
By John Kemp The writer is a Reuters market analyst. The views expressed are his own.
LONDON – Should federal government agencies have to prove the benefits of new regulations outweigh the costs before introducing them?
It sounds like a simple question with an obvious answer. But the role of cost-benefit analysis in writing federal regulations (and even laws) is shaping up to be one of the biggest battles between the Obama administration and business groups in 2012.
On one side are business groups such as the U.S. Chamber of Commerce and the International Swaps and Derivatives Association (ISDA), backed by conservative lawyers such as Eugene Scalia (son of Supreme Court Justice Antonin Scalia) and a group of judges on the U.S. Court of Appeals for the District of Columbia Circuit who oversee most federal rule-writing.
On the other is the White House, the Treasury and a host of agencies stretching from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC).
QUEST FOR QUANTIFICATION
What was once an esoteric legal dispute is turning fiercely political.
@Mott,
Correction: Third paragraph should have read “Only to such extent as unelected and unaccountable government bureaucrats unreasonably and without appropriate justification impose artificial and unnecessary “qualifications” on the accomplishment of projects or employment of people is there any connection between the adverse effect of ill-considered and arbitrary bureaucratic actions and inactions and the reciprocal and adverse effect on American’s “cost of living”.
from Don Tapscott:
20 big ideas for 2012, continued
The views expressed are his own.
What will happen in 2012? In the spirit of the aphorism “The future is not something to be predicted, it’s something to be achieved,” let me suggest 20 transformations (which Reuters will publish in four groups of five; the first can be found here). We need to make progress on these issues now to prevent next year from being a complete disaster.
These ideas are based on the research I did with Anthony D. Williams to write our recent book which comes out in January 2012 as a new edition entitled Macrowikinomics: New Solutions for a Connected Planet.
All 20 are based on the idea that the industrial age has finally run out of gas and we need to rebuild most of our institutions for a new age of networked intelligence and a new set of principles – collaboration, openness, sharing, interdependence and integrity. These big ideas will be the focus of much of my writing next year.
6. The Arab seasons: Getting beyond wiki revolutions to democratic, secular governments
In Egypt and Tunisia we saw a revolution in how to foment revolutions. Now we need to reinvent how to build democracies. Enabled by social media, anti-government leadership in these two countries came from the people themselves rather than a traditional vanguard. Tools such as Facebook, YouTube and Twitter radically lowered the cost and effort of collaboration and undermined state censorship. Now leaders are beginning to use the same tools to help build functional democracies. "Social networks, Twitter and texting were critical to the revolution," said Yassine Brahim, Tunisia's new minister of infrastructure and transport, last year at Davos. "We are going to leverage social media to build a horizontal democracy rather than a vertical democracy." We must ensure that the wiki revolutions result in just societies, and not be taken over by the old regime or other regressive forces.
7. As the Old Media collapse, improve how We inform ourselves as societies
from David Cay Johnston:
Closing Wall Street’s casino
The author is a Reuters columnist. The opinions expressed are his own.
A superb example of a sound rule in law and economics that needs reviving, because it can halt the rampant speculation in derivatives, is the ancient legal principle that gambling debts are not enforceable through court action.
Not so long ago -- before casinos, currency and commodities speculation, and credit default swaps became big business -- U.S. courts would not enforce gambling debts.
Restoring this principle offers a simple way to shrink the rampant speculation in derivatives that was central to the 2008 meltdown on Wall Street.
Professor Lynn Stout, a deeply principled Republican capitalist who teaches corporate law at the University of California, Los Angeles, raised this issue at a conference where we both spoke about the 2008 Wall Street meltdown.
"Derivatives are gambling," she said, referring to credit default swaps, at the University of Missouri-Kansas City law school conference on the financial crisis. "They are a zero-sum game in which one side loses the bet and one side wins," Stout said.
Actually they are worse than that, since the hefty fees Wall Street pockets for arranging the bets result in a less-than-zero-sum game.
@AdamSmith
“We need a fighter”. How about Elizabeth Warren in the future?
‘Random refereeing’ of economy is not what’s stagnating it
Apparently, the U.S. economy is being held back by massive uncertainty over new regulation, future taxation and the deficit and how it will be handled, a state so frightening and confusing that investors won’t invest, businesses won’t hire and nervous consumers have taken to their beds.
That, at least, is the account of Dallas Federal Reserve President Richard Fisher, who, in a speech last week, blamed fear of the arbitrary exercise of power by those in government for slowing the economy and putting those who make, employ and spend in a “defensive crouch.”
“For some time now in internal discussions with my colleagues at the Fed, I have ascribed the economy’s slow growth pathology to what I call ‘random refereeing’ — the current predilection of government to rewrite the rules in the middle of the game of recovery,” Fisher told business leaders in San Antonio.
“Businesses and consumers are being confronted with so many potential changes in the taxes and regulations that govern their behavior that they are uncertain about how to proceed downfield. Awaiting clearer signals from the referees that are the nation’s fiscal authorities and regulators, they have gone into a defensive crouch.”
Saying that businesses and consumers aren’t spending and investing because they are worried about uncertain new regulations and taxes is like saying a man standing on the side of the road next to his wrecked car has stopped driving because his insurance premium is about to go up.
Sure, it’s a factor but it is not the main cause.
Let me offer a simpler explanation: The United States is suffering from a shortage of final demand, the lack of which carries much more weight in economic decisions than concerns about how the new consumer financial protection rules will be carried out.
“how is deflation a bad thing?”
If you have money saved, it’s not. If you have debt, though…
The slow death of the regulatory state
At a time when public spending and deficits are ballooning on both sides of the Atlantic, taxes are rising and governments are enacting far-reaching reforms to financial regulation, healthcare and carbon emissions, it might seem strange to talk about the withering away of the state as an economic and industry regulator.
The past year has seen thousand-page bills on healthcare and banking reform and the greatest-ever increase in government spending outside wartime, prompting small-government conservatives to complain bitterly about over-reaching by the Obama administration and the resulting threat to individual freedom, enterprise and wealth creation.
Advocates for U.S. banks complain heightened capital requirements and compulsory clearing of derivatives will hamper their ability to extend credit and raise costs for customers. In the United Kingdom, retailers have fought a high-profile campaign against higher payroll taxes. Everywhere businesses groan about the burden of complying with an inexorably growing list of government regulations.
Free-market advocates at “The Economist” magazine have stressed the need to begin rolling back the state after a period of unprecedented peacetime expansion.
Adam Ridley, former director-general of the London Investment Banking Association, has an impassioned column in today’s “Financial Times” warning that “regulatory policymaking in Europe has become much harder to influence” because “the ideological and emotional context is no longer sympathetic”.
“Financiers have become public bogeymen, and the philosophy of liberalised global markets has become, in the eyes of many, the discredited Anglo-Saxon model. In Europe especially, the City’s traditional confidence is often seen as hubris”.
WEAKNESS NOT STRENGTH But a closer look at the events of the last decade suggests it is not the over-mightiness of the state but its increasing weakness that lies at the root of a long list of catastrophic failures — from the mess in the U.S. mortgage market and banking industry, to the tragic mining accident at the Upper Big Branch mine in West Virginia and now the disastrous slick emanating from BP’s oil well in the Gulf of Mexico.
Yes, you are correct. No one should believe for a second that industry self-regulation could be a cure. Weak, compromised regulators were the problem in the cases you cite. I say make the regulators responsible. Rip their hearts out (metaphorically speaking) if they fail at their assigned task of regulation. Line those in industry who were in any way involved in these failure and rip their hearts out too. We seem to have learned as a society that drunk drivers are a hazard to society. These folks are too. A little round of prison time to all involved! Make it easier to prosecute by law or persecute by regulating board. The public is still hopping mad that Wall Street, coal mine owners, and now oil men get away with what they do and spend no time in jail or receive any punitive action. Don’t make the company responsible, make it an individual responsibility. When someone fears for their job, their life, and their livelihood – when they fear incarceration – that’s when folks straighten up and give up industry’s version of drunk driving.
America needs sensible, bipartisan financial reform now
– By Rob Nichols is president & COO of the Financial Services Forum. The views expressed are his own. —
Reform of our financial supervisory framework is a top priority for the members of the Financial Services Forum, and should be for our nation. In addition to protecting investors, consumers, and shareholders, bipartisan financial regulatory reform will bring much needed certainty to our capital and credit markets and help to fuel our economy and create jobs.
To maintain a position of financial and economic leadership, the United States needs a 21st century framework of financial supervision that protects the interests of depositors, investors, and consumers, and policy holders; ensures the safety and soundness of financial institutions; ensures financial system stability; and ensures an effective and competitive financial marketplace to fuel economic growth and job creation. Stated another way, financial reform must minimize the chances of another fire, while providing the means for effectively fighting another crisis should it occur.
Toward that end, the Financial Services Forum considers the following reforms essential:
• End “Too-Big-to-Fail”: The shareholders and management of financial institutions – regardless of size – should never again be insulated from the consequences of their own mistakes. The discipline of potential failure is necessary to ensure truly fair and competitive markets. Accordingly, Congress should provide the relevant agencies with the legal authority, procedural protocol, required resources, and expertise for resolving even the largest, most interconnected, and complex entities in a manner that preserves public confidence, protects systemic stability, and provides reasonable certainty to customers, shareholders, creditors, and other stakeholders. More effective supervision coupled with resolution authority is the remedy to too-big-to-fail – not the preemptive dismantling of large, healthy, well-managed institutions.
• Enhance Consumer Protection: The United States cannot be a world-class financial marketplace unless consumers have full confidence in the safety and soundness of financial institutions, the integrity of the markets, the quality and suitability of financial products, and the basic fairness of the broader financial system. Views differ on the best means of ensuring stronger consumer protections, but strong national standards – which would promote consistency of application and enforcement of consumer protection rules across all financial institutions – should be the principle that guides consumer protection efforts.
• Regulate Over-the-Counter Derivatives: Derivatives are financial tools that enable corporations and other businesses to hedge the risks to which their businesses are exposed – thereby lowering the cost of capital and contributing to economic growth and job creation. Effective oversight of OTC derivatives markets is necessary to: 1) ensure those markets do not threaten the stability of the broader financial system; 2) promote market transparency and efficiency; 3) prevent market manipulation, fraud, and other abuses; and, 4) ensure that derivatives are not used or marketed inappropriately.
Actually, it was the Republicans who in 2002, decided that the world needed “free market, unregulated banking”. And they took off any regulation that would control madness. Remember, for six years leading up to this disaster, the Republicans controlled all three branches of government.
However, Frank, Schumer and Dodd, did nothing to stop this insanity. In fact, they did push hard and successfully for loans to people who were not quality loan candidates; both during the Clinton era and during the Bush era.
Both parties strive to work only for their respective extremes: right or left. America suffers badly because of this.
mst3000j wrote “It was Bush who put us into war; and I am all too confident that Gore would have gone the same route what with his war-mongering VP choice Mr. Joe Liebermann. I suspect millions would have been dead.”
I made assertions which I backed up with evidence. The only evidence you provide to back up your convictions is your own confidence in their truth. Well, that is quite inadequate. Lieberman was not know for being a “war-monger” at the time of the 2000 election and regardless the office of the VP holds little power unless the president sees fit to cede decision making.
Furthermore, it is willfully ignorant thinking to conclude that Gore would have invaded Iraq. The Clinton/Gore administration showed no appetite for invasion despite conducting an ongoing air war against Hussein. Nothing in Gore’s record indicates that he wished for a unilateral invasion, whereas much of Bush’s pre-election rhetoric did signal this intention.
You also write: “There is a false equivalency between the actions of Bush/Cheney and the running of public citizen Nader for president. You need to clarify these things into your prejudiced and regressive posting.”
I detect some confusion in your post about what the term ‘false-equivalency’ means. The definition of false-equivalency refers to an argument which seeks to make equal and the same two things which are not. I use it to refer to your idea that Republicans and Democrats are the same (i.e. “Republocrats”–very clever by the way).
You seem to be using the term to state that there is no equivalency between Bush/Cheney and a mythical Nader administration. It’s an obvious point and a red-herring besides. Of course a Nader presidency would not have been the same thing as the Bush presidency. What you can’t seem to grasp is that Nader had no more chance of being president than you did. Even Nader understood this. As I demonstrated in my previous post, he was actively trying to prevent Gore from being president so that the “Revolution” would finally be brought on by a progressive population pushed to the brink. That was his disgusting strategy, and it tells any rational person all they need to know about his fitness for the office should the dog ever miraculously catch the mechanical rabbit.
That you still pine for the Nader administration that you believe could have been tells everyone how deeply out of touch you actually are.